DEARBORN, Mich. – The struggle over whether the $1.8 billion DFCU Financial will or will not become a mutual bank has entered its middle stage. Last week the credit union began sending out conversion vote ballots to its 160,000 members, along with disclosure packages which are meant to explain the vote and urge them to support the charter change. In addition, both the DFCU Owners United Group and the credit union have launched advertising campaigns in the region's smaller newspapers and Michigan state legislators and the governor have weighed in on the matter. Many were caught off guard by the credit union sending the ballots since it had not yet formally answered a letter from Linda Malec, spokesman for DFCU Owners United that sparked an NCUA request for a Supervisory Committee investigation into some of the credit union leadership's actions and communications in the conversion matter so far. But on March 20 the credit union's supervisory committee sent Malec and NCUA a three-page letter explaining that it had hired independent legal counsel who had determined that there was no conflict of interest in having the members of the credit union's supervisory committee become board members in the new bank. Because the board had not informed the supervisory committee of its plan until after it had voted to approve the plan of conversion, which included the payment of fees to board members as well, there could have been no conflict of interest, the committee said. The letter did not identify the independent counsel used nor did it discuss the possible conflict of interest in having the CU's supervisory committee having any further review of the credit union's conversion process after it knew about becoming bank board members should it pass. DFCU's March 20 letter also maintained that Mark Shobe had explained to members during the annual meeting that he and the other executive staff could buy stock from the newly formed mutual holding company, if the conversion gets that far, on the same terms as any other member. The supervisory committee ignored that Shobe had neglected to mention that he or the board members would have access to stock as part of their compensation packages in excess of that available to most members. The letter blamed NCUA's regulations, which require the boxed disclosure statement, for preventing the credit union from communicating in writing with its members about the conversion. It did not acknowledge that there are other ways of communicating besides writing to members and that NCUA's regulations do not prohibit those communications at all, a point NCUA has made several times in the past six weeks. Finally, the supervisory committee dismissed the member resolution passed at the annual meeting asking the board to withdraw the conversion application, essentially arguing there were too few people present to make the case. "Even had the members received information on the charter change," the letter wrote, "the opinion of 68 members on the issue is not relevant to, and could potentially mislead the 141,000 voting members of the credit union." Once they arrived, the disclosures didn't hold too many surprises as they generally followed a shorter form of the same disclosures other credit unions that have converted to banks and were advised by the Washington D.C. law firm of Silver, Freedman and Taff have used. Like previous conversion attempts, the CU estimated the cost of converting to become a mutual bank to be a little over $1.2 million dollars, just about what Community Credit Union spent in its conversion, according to information the credit union must provide in its mandated boxed statement that it sent with the disclosure materials and conversion vote ballot. Community Credit Union was a $1.4 billion CU that converted to a mutual bank last year after the vote and a court fight with NCUA. The total for DFCU Financial breaks down as the following: *

$5,400 for regulatory application processing fees *

$177,000 for printing *